Such a statement can’t be taken lightly. Even if he is out of his old job, Jaipal Reddy continues to be a responsible cabinet minister in the UPA government and his written communication to Vahanvati can’t be wished away simply as an allegation or a departmental note devoid of merit. If his note was wrong and politically-motivated, Reddy deserved to be sacked from the government and not transferred to another cozy cabinet job.

In Reddy’s view, RIL has been “hoarding” gas by slowing down output from the company’s offshore fields in the Krishna-Godavari (KG) basin in the Bay of Bengal resulting in a massive supply shortage and causing losses to downstream industrial users to the tune of Rs. 40,000 crore, this year. The user industries sustained a loss of some Rs. 20,000 crore last year when the gas supply was first cut down to build pressure on the oil ministry for higher price realisation. The pressure was stubbornly resisted by physically-challenged, but mentally-strong Reddy, who has since been shunted out to head the low-profile science and technology ministry.

RIL is among the world’s most profitable companies. Last year, the company was ranked 99th in the ‘Fortune 500’ list – a 31-notch up from the previous year’s ranking. It clocked a turnover of US$ 76 billion and net profit of $ 4 billion. RIL became a debt-free company on a net cash basis. RIL showed cash balance of Rs. 70,252 crore ($13.8 billion) at the end of 31st March, 2012 as against outstanding debt of Rs. 68,259 crore ($ 13.4 billion). Yet, RIL is unhappy. It wants more. Why not? It not used to hear ‘no’ from any government?

Thanks to the great support RIL received from UPA’s previous and most controversial petroleum minister Murli Deora, a long-time Ambani family friend and ‘Chachaji’ (uncle) to both the brothers, Mukesh and Anil, the company was allowed a big price increase for KG basin gas against the original agreement it had with brother Anil’s Reliance Power. The matter went up to the Supreme Court after Reliance Power sued RIL for alleged breach of the price and supply contract. The apex court held that the government has right to regulate price and distribution priorities of scarce natural resources. While Deora went by the letters of the highest judicial verdict to jack up the KG basin gas price by nearly 100 per cent to benefit RIL, Jaipal Reddy followed the spirit behind the same Supreme Court judgement to prevent a further price increase of KG basin gas, in the national interest.

It is to be seen now if the incumbent, Veerappa Moily, the third union petroleum minister in less than four years of UPA II, takes an opposite view to accept RIL’s demands to raise KG basin gas price, also in the national interest, ostensibly to make further exploration and exploitation of hydrocarbon from the giant off-shore fields financially viable in the long run. Within four days in the new office, Moily had made an abortive attempt to raise cooking gas prices. The minister is free to make his own interpretation of ‘national interest’ to benefit RIL and end-users even if that means losing a few billion dollars in government revenue and facing some noisy protests from Samajwadi Party, JD-U and Left MPs in Parliament.

Leave alone the question of propriety, it may not be the last time for the government to come in defence of RIL’s seemingly unfair demands. Like all other public companies, RIL too is under pressure from its shareholders to show higher profits, year after year. Although RIL’s turnover in 2011-12 rose by 29 per cent, its profit had dipped by 2.8 per cent compared with the previous year’s. RIL’s share price stayed depressed until Reddy was replaced. Reddy’s less sympathetic stance on RIL’s gains and the exchequer’s losses had substantially erased RIL’s and Mukesh Ambani’s wealth in terms of market capitalization. The price of RIL stocks jumped by two per cent as soon as Reddy was unceremoniously sent off from the oil ministry. The market is now bullish about better RIL-government relations under Moily.

Unfortunately, the power-blind UPA government refuses to learn. Instead of supporting Reddy on the KG basin gas price issue, the prime minister and the UPA chairperson chose to go after him in the midst of a disagreement between the country’s most politically influential industrial entrepreneur and the petroleum ministry, further fuelling the controversy. The government should know it fully well that any price concession to RIL at this stage at the cost of the exchequer will provide fresh ammunition to the Comptroller and Auditor General of India to make a fresh audit investigation into the new deal. The end result may not act as an image makeover for the election-bound UPA government.

Incidentally, the 2G spectrum allocation controversy and Coalgate are all about pricing – the pricing of scarce national resources given to business corporations for commercial exploitation and harnessing them for the benefit of all. Although, to be honest, the business community’s interest in these resources is guided strictly by their profit potential, both parties — the lessor (the government) and the lessee (private operators) — must draw a clear distinction between earning fair profit and profiteering since these resources eternally belong to the nation. Their commercial exploiters should be seen as benevolent business entrepreneurs and not as malevolent profiteers.

Finally, the government reserves the right to take over or nationalize such unfairly exploited natural resources by private business corporations or those enterprises posing threat to national interest. The present UPA chairperson may take cue from her mother-in-law, the late Congress president and prime minister India Gandhi, who tackled somewhat similar situations during her early years in the office by nationalizing the coal industry to stop slaughter mining and profiteering by private entrepreneurs. She also nationalized foreign oil companies for indulging in supply bottleneck during the 1971 Bangladesh liberation war posing a threat to the national security.

Just a decade ago, the state of California in the US took over two power utility companies on charges of profiteering. If need be, the government should not hesitate to take over the control of the entire KG basin asset from RIL and hand it over to ONGC Limited for operation in larger public interest. Similarly, the government should also cancel the allotment of such coal blocks and spectrums to private enterprises if they are found genuinely underpriced. Few will disagree that priceless natural resources such as land, air, water, petroleum and minerals can’t be left safely with a bunch of greedy private profiteers. (IPA Service)